Ganjanomics

Bringing Humboldt's shadow economy into the light

One evening last October, I met with Anna Hamilton in the Northern California town of Garberville. A singer-songwriter with a barbwire voice, Hamilton is known locally for her radio show,
Rant and Rave, Lock and Load and Shoot Your Mouth Off
-which, it turns out, is a pretty good description of her approach to life.

"I'm a little gutterballer from the beach," she said. "And I get nervous around too much normalcy."

We sat by the front window in a bar called the Blue Room, shielding our eyes from the sun while a pair of hippies attempted to maneuver their minivan into a parking space. As a dreadlocked woman passenger gently upbraided him, the scrawny, bearded kid behind the wheel struggled to line up between the two white lines on the pavement. The entire operation seemed to unfold in slow-mo. Hamilton watched in disbelief.

The hippies were among a wave of migrants that appear each fall to help with the harvest. And on those still-warm October days, Garberville and its neighbor, Redway, a couple miles down the road, felt like the forward operations base for a hard-core gardening cult. Citizens stormed local garden centers, loading up last-minute supplies and hauling them over a tangle of dirt roads into the surrounding hills.

Out in that wild country, concealed behind private gates in the draws and gulches that lace the rumpled landscape, lays the heart of what may be the biggest false-fronted economy in the United States. California produces nearly 40 per cent of the country's marijuana; worth an estimated $13.8 billion, it is by far the state's biggest cash crop. The longtime hub of the business is here, in Humboldt and neighboring Mendocino and Trinity counties - the legendary Emerald Triangle.

Despite the drug economy's pervasiveness, locals observe a kind of winking discretion that goes back four decades, when the hill culture first retreated from the reach of authority. As one grower put it, "We all are keeping each other's secrets, and there is kind of a community because of that."

But Hamilton has pushed for more candid talk about Humboldt County's economic reliance on marijuana. The formerly logging-dependent counties on the North Coast have struggled economically for years, and the money weed generates is real. Still, the marijuana business is an extremely complicated creature. In 1996, California became the first state to legalize marijuana for medical use. Yet the majority of the marijuana grown in the Emerald Triangle goes to recreational markets, and roughly 90 percent is sold outside the state - where it has been very, very illegal.

That, however, is changing. A raft of other states have passed medical marijuana laws, and last fall, California voters took up the question of whether to legalize pot for recreational use as well. Despite seemingly broad support, Proposition 19 narrowly lost at the polls, receiving 46.2 per cent of the vote. But in the aftermath of its failure, marijuana's slow roll towards legitimacy has continued, if somewhat more sluggishly.

Over the past year, trade organizations and the other institutions of commerce by which entrepreneurs of all stripes sustain themselves have spontaneously emerged. Marijuana growers have begun negotiating the complicated realities of regulation, launched lobbying campaigns, and even enlisted government support in fighting for market share. The county government is itself trying to delicately navigate its way into tapping an industry that is still mostly illegal.

That could soon pit the county against the federal government - but it also may be the only practical thing to do. After all, Hamilton said, "It's stupid to not just flatly admit that marijuana is what's holding this county's underwear up."

The Emerald Triangle
has long been isolated by distance and geography, holding itself consciously aloof from the rest of California. Until the 1920s, the main way to reach the North Coast was by ship, and the timber industry was king, sustained by redwoods that grew enormous in the coastal fog. By the late 1960s, however, when the area appeared on the psychic maps of disillusioned hippies desperate to escape from San Francisco and elsewhere, much of the land was logged over - and cheap.

"They could come here and live off of welfare and peanut butter-and-banana sandwiches," says Charley Custer, a transplanted Chicagoan, "and just kind of scrounge along."

But the hippies were idealistic, too - dreamers who hoped to leave mainstream America behind and create a different reality. Some began using their new land to grow pot on the side. They weren't the only ones. The timber industry, battered by environmental regulations and unfavorable economics, was wheezing a death rattle: In the two decades after the hippies arrived, logging in the county declined by 60 per cent. Meanwhile, a single marijuana plant could fetch as much money as an entire redwood. Even the old-guard loggers who would rather cut a tree than hug it saw the practical benefits of the new crop.

"Now it's hard to tell who's who," says Eric Kirk, a Garberville attorney, "because when the mills all closed down, everybody got into marijuana." Even as early as the '70s, it was clear that a new age had dawned. Itinerant hippies brought in specimens of
Cannabis indica
, a highland champion, from Afghanistan, and crossed it with
Cannabis sativa
, the Central American species that had long been the mainstay of U.S. growers. The plants that resulted were hardier and produced a more potent high. Then came the discovery that unpollinated female plants - called sinsemilla - are richer in THC, the active chemical in marijuana.

The new stuff practically sold itself, and Humboldt County became a slightly grubbier realization of the classic California dream. "I've heard stories about local kids who went away to college, and were living on Top Ramen diets. They came back, and their buddies who didn't go to college are driving around big rigs with expensive stereos," Kirk says. "And they're thinking, 'What the hell am I doing?' "

That kind of entrepreneurialism is hard to hide, and the government took notice. In 1983, the Reagan administration created the Campaign Against Marijuana Planting, or CAMP, a multi-agency SWAT team that bills itself as the nation's largest law enforcement task force. Practically everyone who lived in southern Humboldt in the late '80s and early '90s remembers frantically dialing neighbors to warn of impending busts, and women and children streaming out of the hills to safety.

CAMP estimates it has removed nearly 25 million marijuana plants from California since its creation. But there was a flip side. Many people jokingly refer to CAMP as a price-support program for marijuana. By the mid-1980s, with busts limiting supply, pot was going for prices that have not been matched since - as much as $6,000 a pound, wholesale.

The high-risk, high-reward nature of the business only sharpened the local spirit of self-reliance, daring and innovation. Certain handymen began specializing in the construction of plywood platforms for marijuana in tree canopies, hidden from helicopter-borne drug agents. The community radio station, KMUD, doubled as an early-warning system, broadcasting the position of law-enforcement vehicles headed into the hills.

Then, things began to change. California's legalization of medical marijuana in 1996 raised the curtain on an elaborate pantomime that continues to this day. With a doctor's recommendation, a patient could either grow limited quantities for personal use, or purchase it from dispensaries. Some 2,100 dispensaries have sprung up throughout California, and the medical marijuana revolution has spread to every Western state except Utah, Idaho and Wyoming. Two years ago, the federal government issued its own imprimatur of sorts, when Deputy U.S. Attorney General David Ogden directed federal prosecutors to leave alone "individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana."

With time, the Emerald Triangle's marijuana growers have begun acting more like real farmers. Today, many have contracts to supply medical dispensaries in the San Francisco Bay Area, Sacramento and Los Angeles. A few growers even receive IRS reportable-income forms from the dispensaries they sell to, and pay federal tax. An entire cloud of supporting businesses has also emerged, from attorneys who specialize in ensuring legal compliance to labs that analyze and certify the product's purity. A company called Statewide Insurance Services offers marijuana crop insurance, including a special "raid coverage" option. The availability of insurance has, in turn, raised the prospect that growers who supply dispensaries may someday be eligible for crop loans from banks, just like tomato farmers.

But the enthusiastic pursuit of what is still largely an unregulated industry has generated fallout, too, drawing unwelcome attention to the whole enterprise. Illegal diversions of water for marijuana gardens, together with indiscriminate use of fertilizer and pesticides, have choked important salmon streams. The widespread use of rat bait took a toll on birds of prey. And the CAMP assaults literally drove some growers underground: Buried shipping containers with high-intensity lights powered by diesel generators - their fuel tanks holding as much as 2,000 gallons - proliferated in the hills.

Hamilton and other like-minded residents took to the airwaves on KMUD and began proselytizing against the "diesel cowboys" who ran such operations. Diesel dope's carbon footprint would give Al Gore a case of the fantods: According to some calculations, it consumes about 75 gallons of fuel and releases more than two tons of carbon dioxide per pound of pot produced. Some growers dumped used crankcase oil from their generators straight into the ground. Poorly maintained generators caught fire in the middle of the woods. And they leaked - sometimes a lot. In May 2008, 1,000 gallons of diesel-grow fuel poured straight into Hacker Creek, which provides habitat for salmon and drinking water for the watershed's residents.

But an even bigger problem has emerged recently. Criminal cartels, mostly with Mexican ties, have begun moving onto federal, state and private timberland and setting up monster grows with tens of thousands of plants. Last year, CAMP arrested 182 people in California, seized more than 5 million plants and shot at least seven people; the vast majority of the raids were aimed at cartel grows.

All this has helped shape an unusual social code in the Emerald Triangle. Practically everyone, including the police, distinguishes between "outlaws" - the mom-and-pop, reformed-hippie operators who grow a little dope to make ends meet and put their kids through school - and "criminals." And smart growers, while they may technically be breaking the law by growing for recreational markets, meticulously observe a certain set of rules that, at least theoretically, put them in compliance with the state's medical marijuana law. If a grower has fewer than 100 plants, the federal Drug Enforcement Agency generally leaves the decision to prosecute up to the local sheriff. And as long as the grower's not too flashy and doesn't go around brandishing guns, the sheriff will usually leave him be.

Scrupulous observance of the law is, although officials hesitate to say so, tempered by a very practical concern. If local sheriffs were to crack down on the outlaws, they would destroy a significant chunk of the regional economy - and their own budgets.

Just how important marijuana is to Humboldt County's economy may be as unknowable as the ineffable Tao. One Humboldt State University economist suggests that a quarter of the county's economy - roughly a billion dollars - is marijuana money. Conventional wisdom suggests that, particularly in southern Humboldt, the percentage is much higher.

Ernie Branscomb is a genial, fifth-generation Humboldter who owns Garberville's version of Sears. With his white mustache, bald head and easy banter, he would seem at ease behind a barber's chair. He's part of the unreconstructed Old Guard here, at least technically. "I've never grown marijuana," he said. "I've never even used marijuana. I'm afraid I'll
like
it."

Branscomb's store has given him a front-row view of the business, so I asked him how big a part of the local economy he thought marijuana is. He pondered for a moment. "In my opinion," he said, "it's about 80 per cent."

I laughed and said that was impossible. Branscomb looked at me like I was an idiot.

"Look around you," he said.

A couple of days
after I talked with Anna Hamilton, I met up with a grower alongside a frontage road in southern Humboldt. I'll call him Robert Grant. He wore logging boots, cargo pants and a T-shirt, and had the wiry build of someone who spends a lot of time on the move outside. We followed a labyrinthine route along dusty roads to a piece of land perched halfway up a pretty draw full of oaks, golden meadows and firs, with sweeping views of the surrounding hills.

Grant originally came from Southern California to chase the surf on the coast nearby. He slowly worked his way into the marijuana scene, careful not to disturb the local detente. It has served him well. At this particular spot, 60 plants were perched in the sun, standing in long raised beds and a handful of blue plastic kiddie pools. The leafy plants were as tall as apple trees; together, they were probably worth about half a million dollars, wholesale.

Among them were strains with names like Blueberry, Amazing Haze and Armageddon. But Grant was most excited about a new twist on one called Super Silver Haze.

"We've been working on it for nine years," he said, reaching to pull down a bud that glistened with silvery resin. I took a deep whiff, and my head filled with the plant's breathy, arresting allure.

Grant saw my eyes widen.

"Yeah," he laughed. "That's ... that just rocks."

Breeding marijuana is its own kind of magic. Grant talked about the elusive quest to balance a body high with a head high; to blend the perfect combination of looks, aroma, flavor and THC; and to encourage resistance to mold, an incessant problem with the coastal fog. Breeding and growing styles can border on the occult. One breeder meticulously tracks each plant's parentage in his quest to produce super-potent "stupid dope." Others drive nails through the plants' stalks, on the theory that torture will produce more THC. And one group of ritualists grows weed that's beyond hand-crafted, observing elaborate precautions to avoid touching the buds during harvest - the better to preserve their sanctity.

Grant's pot patch reflected the evolving state of the Northern California marijuana business. His cannabis was contracted to a medical marijuana dispensary in Sacramento. In the middle of the garden, angled toward the sky, was a white board painted with a red cross. An attached bundle of paperwork noted his compliance with the state's medical marijuana law.

"That's for the helicopters," Grant said. He had little fear of a raid. The helicopters appeared once earlier in the summer and then stayed away. And now it seemed the entire industry was poised to come further out of the shadows.

In 2009, with the California budget going up in smoke, then-Gov. Arnold Schwarzenegger - no dummy about his constituents' yen for dope - began to consider legalizing recreational use of marijuana, and then taxing it, as a way to stem the state's looming fiscal crisis. The state tax office estimated that a $50-an-ounce levy on marijuana could, when coupled with increased sales-tax revenue, generate $1.4 billion for state coffers. The legalize-and-tax mantra was subsequently taken up by Oakland entrepreneur Richard Lee, who created Oaksterdam, a sort of vo-tech school for aspiring pot growers, and almost single-handedly turned the city into a medical-marijuana mecca.

When I met with Grant, Californians were within weeks of voting on Proposition 19. Many growers opposed legalization because it was sure to drop prices, although they hesitated to say so on the record. Others, like Grant, felt differently.

Despite the spreading legalization of medical marijuana, the profit margin has stayed fat: For a grower like Grant, it typically costs $400 to $500 to grow a pound of marijuana that will go for $2,000 wholesale. And with full legalization, he explained, "you're talking about a lot more consumption." Even if prices were to fall to $1,000 per pound, he said, "I'll take that. Absolutely."

From Grant's perspective, full legalization seemed, at some point, inevitable. Several fellow growers had recently formed the Humboldt Growers Association, in essence a lobbying group to help growers shape - and get out in front of - the regulations that legalization was sure to bring. The Growers Association had begun drafting its own proposed regulations to submit to the Humboldt County board of supervisors, which would govern the manner and extent to which marijuana was grown, and allow the county to collect taxes and fees.

"Everything's tracked. Everything has a permit number that tracks it right down to the farmer," Grant said. "It's just like lettuce, just like tomatoes, just like strawberries."

After years of keeping their heads down on the outlaw fringe - where politics meant little more than supporting the local road-maintenance association - growers were taking a big step into a new and complicated realm.

"There's a lot of uncertainty in the air," Grant said. "But a lot of entrepreneurs are really excited about the potential."

To a large extent
, growers' worries these days aren't all that different from those of the folks at any local chamber of commerce. There is the issue of brand protection, for instance. Last September, a couple of hustlers moonlighting as monks showed up at the International Cannabis and Hemp Expo in San Francisco, hawking what they claimed were bona fide Humboldt seeds.

In response, local growers proposed an ordinance to protect the county's good name, which has acquired a special cachet over the decades. A fellow named The Man Who Walks in the Woods drew up a draft resolution freighted with 11 "whereases," one "be it resolved," and a "be it further resolved," and called for amending the county code to note: "The name 'Humboldt' as it expresses or implies or suggests Humboldt County, California is hereby reserved for the permanent and exclusive benefit of the legal residents of Humboldt County, California." Other enterprising souls began researching the feasibility of trademarking the Humboldt name, which sparked some nervous speculation that one or another local faction might lock up the appellation.

People also worried about the Emerald Triangle's distance from its main markets. There had been some recent discussion about using refrigerated semis to haul tons of weed down Highway 101 to the Bay Area. Somebody proposed repurposing an old armored car as a dope-delivery vehicle. ("I saw the thing, in Redway," Anna Hamilton told me, slightly incredulous. "It's an old dusty Brinks truck that's been sitting in somebody's yard for the last 10 years.")

Behind all this was a much more serious debate: how to bring Humboldt County's shadow economy into the bright light of government-regulated industry. For many growers, that's a pretty radical change. The black market is, in many ways, the ultimate free market. "The irony is that the most progressive community in the nation has been living Ronald Reagan's wet dream," Hamilton told me. "It's going to be a hard sell. A lot of people don't understand why a third of their income should go to taxes. They have never had to share their money with anyone. " But big shifts are already happening in the business landscape. After four decades, the Humboldt growers, who had perfected the high art of lying low, are being edged out by an explosion of upstart, indoor growers in big cities like Oakland. "The rural counties that grow outdoor weed are getting left behind," Hamilton said.

That profusion of new supply has been pushing prices down, a trend that would be sure to continue with wider legalization. That would undercut Humboldt County's economic basis -- and that suggested a natural alliance between Humboldt marijuana growers and the county government. "The county," Hamilton said, "is a vested partner in the stability of the price."

People in California
's marijuana business refer delicately to what they call a "lack of alignment" between state and federal policy. Today, a medical marijuana garden that is legal under state law can, under federal law, still be prosecuted as a major felony. And the gap between the state and federal worldviews is widening again, causing a distinct sense of unease that the feds may see the defeat of Proposition 19 as a mandate to finally bring the state to heel.

Indeed, this year federal officials have taken a more aggressive stance. The city of Oakland, never a place to tiptoe around a social issue, has been preparing to issue licenses for several indoor medical-marijuana farms, each bigger than a football field. In February, Melinda Haag, the U.S. attorney for the Northern District of California, wrote to Oakland's city attorney to remind him that the federal government still views marijuana as a Schedule I drug - the bad kind. Haag warned that "we will enforce (the Controlled Substances Act) vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even" - in a seeming reversal of the federal government's position - "if such activities are permitted under state law."

The Department of Justice followed up that letter with a barrage of similar messages to Colorado, Montana, Arizona and Washington, and in March, federal agents raided several marijuana dispensaries in Montana. To make sure the point was clear, in June, Deputy Attorney General James Cole issued yet another memorandum, about the Justice Department's position nationwide, writing: "Persons who are in the business of cultivating, selling or distributing marijuana, and those who knowingly facilitate such activities, are in violation of the Controlled Substances Act, regardless of state law."

The Treasury Department, meanwhile, has begun dismantling the basic business infrastructure that medical marijuana dispensaries rely on. This spring, banks holding accounts for dispensaries received a wave of letters threatening to revoke their FDIC insurance, and big banks such as Wells Fargo have since been closing such accounts.

As Humboldt County officials slowly move forward with their medical marijuana regulations - an effort that will likely take at least another year - some wonder whether they should see the Justice Department's recent statements as a warning to hold off. When I talked with Lovelace again in July, he sounded exasperated. "Frankly, the federal position isn't doing anything to actually help us with the issue," he said. "I just don't think they get it."

Anna Hamilton, for her part, has become disillusioned with the slowness of the process, and with HUMMAP, the group she helped to start. In fact, when I spoke with her this summer, she had practically become a cheerleader for the rival Growers Association. "They're putting thousands of dollars into political campaigns up here," she said. "And HUMMAP, meanwhile, can't raise 40 bucks at a meeting with 60 people."

Indeed, the Growers do seem to be building steam. After Bonnie Neely, the county supervisor, lost her re-election bid last fall, they hired her as a consultant. Paul Gallegos, the district attorney, won his re-election campaign, but ended up $47,000 in debt; this July, the Growers co-sponsored a fund-raising dinner for him in Sacramento.

The road ahead is undeniably longer and more complicated than Max Del Real predicted. But Humboldt's growers are used to biding their time. They've been doing it for 40 years.

Robert Grant is keeping a close eye on the Growers Association's progress. After Proposition 19 was defeated, the Growers scaled down their proposed regulations to apply only to medical marijuana. But, Grant points out, their proposal is carefully written so that if - or when - recreational use is finally legalized, it can easily apply to a much bigger market.

"It's so seamless," he says, "it's beautiful."

This coverage is supported by contributors to the High Country News Enterprise Journalism Fund. High Country News Contributing Editor Matt Jenkins has written for the magazine since 2001. His work has also appeared in The New York Times, Smithsonian and several other national publications.